BI reports Rp 15.1t in new lending

JAKARTA (JP): Bank Indonesia said Thursday that new lending through September reached about Rp 15.1 trillion (US$1.59 billion).

Bank Indonesia director for banking supervision Djoko Sarwono said that the new lending had been mostly channeled to the industrial, trade, and consumption sectors.

"We believe that new lending will continue to grow through the end of the year," Djoko told reporters at a fast-breaking gathering.

Indonesia's economy has been plagued by stagnant credit since the country's banking sector began reforms following the economic crisis.

New lending only started in July at a volume of more than Rp 7.13 trillion.

Djoko said that outstanding bank loans as of end of September totaled Rp 280.6 trillion, small compared to total third party funds of Rp 652 trillion.

Many banks have feared to extend new loans due to various reasons including the high risk associated with the real sector.

But Djoko said that although banks had not channeled their money into credit, they have managed to make profits.

He said that operational profit jumped to Rp 3.6 trillion in the third quarter compared to a loss of Rp 8.1 trillion and Rp 500 billion in the second and first quarter, respectively.

He said that the turn around in the banks' profitability was basically due to the increase in net interest margin from Rp 3.1 trillion in the first quarter to Rp 4.8 trillion in the second quarter and Rp 6.3 trillion in the third quarter.

Djoko admitted that the rise in the net interest margin was largely contributed by the huge amount of government bonds in the bank's portfolio.

The government completed the country's costly bank recapitalization program in late October by issuing Rp 430.4 trillion worth of bonds to 27 banks including four state-owned banks and 12 regional development banks. The recapitalization program boosted the capital adequacy ratio of the banks to more than 4 percent.

The banks enjoyed interest rate revenue from bonds injected by the government.

Djoko said that after the recapitalization program, the banks' capital had jumped from Rp 6 trillion in the second quarter to Rp 31.8 trillion at the end of September.

He said that the level of non-performing loans had gradually declined to 27.9 percent from 30 percent in the second quarter and 32.1 percent in the first quarter.

Djoko said that about Rp 54.1 trillion in non-performing loans (NPL) had been restructured by the banks as of end of September.

All of the bad loans of the recapitalized banks, estimated at around Rp 260 trillion, have been transferred to the Indonesian Bank Restructuring Agency (IBRA).

The remaining NPLs held by the banks are those under the category of doubtful or special mention loans.

Domestic banks are required to have an NPL level of below five percent and minimum CAR level of 8 percent by the end of 2001. (rei)